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05

Risk to multinationals from natural hazards 'is increasing'

Open-access content Monday 20th May 2013 — updated 2.45pm, Wednesday 6th May 2020

Large multinationals increasing reliance on international supply chains, infrastructure and markets pose a major risk to business as usual, a report published by the United Nations International Strategy for Disaster Reduction and PricewaterhouseCoopers today has warned.

In Working together to reduce disaster risk, the UN agency and consultancy together outline how even businesses with established risk management systems in place need to do more to protect themselves fully against natural disasters.

Small, more vulnerable enterprises in developing economies do not have the capacity to strengthen their risk management and overall supply chain resilience alone, the report notes. It also finds that few global corporations collaborate actively with governments across the countries they operate in.

Some large businesses rely on the insurance industry alone for risk assessments, with most having only limited access to disaster risk information on which to base investment decisions, it adds.

Global businesses should consider the risks they share with suppliers, small and medium-sized enterprises and other businesses in their supply chain, the report states. They should pay particular attention to those in developing and emerging economies, where disproportionate economic and human impacts of disasters are felt.

Oz Ozturk, PwC partner, said: 'The risks posed by natural disasters go well beyond the boundaries of a company's operations. The damaging effects of disasters are reaching beyond protection insurance covering physical assets, and businesses need to consider productivity, declining customer demand and goodwill, and employee morale and stress.'

PwC noted that UN Secretary-General Ban Ki Moon last week warned that economic losses linked to disasters were 'out of control' after a UN report found that global losses from catastrophic events had already topped $2.5 trillion since the turn of the century.

Together the UN and PwC have launched a new initiative to link private sector businesses of all sizes in disaster planning.

Margareta Wahlstrom, UN special representative of the secretary-general for disaster risk reduction, added: 'While many private sector players are demonstrating an improved understanding of how their operations could be affected by natural hazards, there is a huge need for businesses worldwide to play a more central role in reducing disaster risk. The economic losses speak for themselves.
'The other side of the equation is that disaster risk management is a business opportunity. For example, the development of new crop insurance products or more disaster-resilient infrastructure are major emerging needs in response to extreme weather events, rapid urbanisation and growing exposure to disaster risk.'

This article appeared in our May 2013 issue of The Actuary .
Click here to view this issue

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